Set in the Dogtown area of Santa Monica in the mid–1970s, surfers Tony Alva, Stacy Peralta, and Jay Adams enjoy the life of skating and surfing the pier with board designer Skip Engblom and the other locals. One day, Skip is given polyurethane wheels for the skateboards in his shop, Zephyr Surf Shop. Teenager Sid, a friend of the boys who works in the same shop, invites Tony, Jay, Stacy and the other locals to test the new wheels. They are all amazed as the polyurethane wheels allow the skateboards to make the same carves on flat ground as surf boards on the waves. After witnessing what Todd Levy from the Eastern Shore of Maryland could now do with the wheels, Skip decides to add to his already famous surf team, a skate team, the Z-Boys. The team proves to be a success; winning many contests, Stacy, Jay, and Tony gain popularity from locals across Venice.
A period of hot weather reduces the surf at the pier and the official declaration of a drought means swimming pools cannot be filled with water. Taking advantage of this the Z-Boys start sneaking into local backyard pools to skate in, ignoring Skip’s practice sessions, which angers him. After winning many major contests, the Z-Boys become more and more famous, appearing in various magazines. Stacy, Jay, and Tony start getting noticed by major skating companies looking to take the boys from Skip. One night, Skip throws a party at his shop to celebrate the success of the team. A company owner, Topper Burks, enters the party and convinces Tony that Skip is holding him back, and that it’s time to make him famous worldwide. Tony accepts his offer and leaves the team. Jay leaves the team as well, looking to make more money to help his mom pay the rent on their apartment. Despite Skip’s desperate offers to keep him on the team, Stacy is the last to leave, as he begins getting offers to skate as well as to appear in T.V. Sad and angry, Skip decides to shut down the Zephyr Skate Team.
The three boys become major celebrities. Tony and Stacy now skate for money rather than the passion that Jay continues to skate for. They become enemies of some sort and compete against each other in various contests. Stacy appears on the original Charlie’s Angels show while Tony starts creating his own commercials to manufacture his popular boards and merchandise. Jay is offered $10,000 to appear in a commercial sponsoring the toy, Slinky. However, he refuses, as he has become a much harder person than before. Soon, things start going out of control; at a major skating championship that they all take part in, Tony gets into a fight with another skater in the middle of the stadium, and gets violently knocked out, hospitalizing him and temporarily halting his career. Jay leaves the company he had endorsed when they sacrifice quality for cheap materials. Stacy ends up winning the competition.
Back in Venice, the pier that the Z-Boys use to surf around burns down, which affects them all. Jay shaves his hair and becomes a gang member. Skip, still selling surfboards in his shop, finally decides to settle down and continues his passion of sanding and creating surfboards, as well as solving his financial troubles by selling his shop and is seen singing “Maggie May”. Sid’s long-time equilibrium problem turns out to be caused by a brain tumor, and he undergoes surgery. Though Stacy, Tony, and Jay have all gone their separate ways, they all show up at the same time to visit Sid. Stacy reveals that he is leaving his company to start his own. Sid’s father empties their pool for them to skate in. Stacy, Tony, and Jay skate the pool and bring Sid into the fun on his wheel chair, referencing all the good times they had before they became a skate team.
Closing cards reveal that Tony Alva went on to be a very successful skater and skating’s first world champion (stating that he still sneaks into backyard pools); Stacy Peralta started Powell Peralta, a modern popular skating company that included a 14-year-old Tony Hawk as part of its team; and Jay, too, achieved the only kind of success at skating and surfing he really cared about, becoming known as the “spark that started the flame”. Sid later died of brain cancer. His father’s pool was kept empty and is known as the DogBowl.